“It is critical to treat camp like a business or it will absolutely fail, and to know in your head and heart that if you treat camp only as a business it will also fail absolutely; so always make your choices about the business of camp with the greatest care.”
— Rodger Popkin, Blue Star Camps and former ACA national president
All camps, regardless of tax status, whether for-profit or nonprofit, resident or day, general or specialty, are businesses. While the relationships and skills developed in any camp are of utmost importance, the basics of running a small business apply to all camps. With the breadth of most camp operations, it is a challenge to be an expert in everything from accounting to OSHA regulations to youth programming. There aren’t many small businesses that include facility management, food service, healthcare, educational and recreational programming, risk management, transportation, marketing, technology, procurement, large animals, watercraft, high-risk activities, and parent relations — all with a workforce generally made up of nineteento twenty-five-year-olds.
However, every camp person knows that camp is more than just a business. Camp is a unique business that almost always involves kids, mission-driven people, and a great deal of passion from the owners, directors, and executives who know the value of the camp experience. Just as ignoring the business side of camp can be fatal, so, too, can looking only at the business side. Balance in decision making is the key; success comes from maintaining the passion for camp while paying attention to the business of camp.
Rodger Popkin of Blue Star Camps in North Carolina and a former ACA national president has said, “It is critical to treat camp like a business or it will absolutely fail, and to know in your head and heart that if you treat camp only as a business it will also fail absolutely; so always make your choices about the business of camp with the greatest care.”
If you’re thinking of starting a camp, then chances are you are passionate about c amp. But moving your dream to reality involves many decisions about how you will brand, form, and operate the business, beginning with choosing a camp name. (See Table 1 for a new business checklist.)
Choosing a Camp Name
Your camp’s name is the first impression that most people will have of your program, so make it a good one. Most states will have an online method to search for entity names to see if the name you have chosen is already in use by someone else; search your state’s Web site for “name reservation” or “starting a business.” Names will last forever, so camp professionals need to spend sufficient time researching the proposed camp name. Are there other camps with the same name? Luckily, with online searches it is now very easy to see if other entities with similar names exist. If you are part of a larger organization, find out if there are naming conventions that you must follow. Some national organizations like Camp Fire and the YMCA prescribe that the organization name should be the first part of the camp name.
If your new venture will be the purchase of an existing program, you need to consider whether to keep the same name of the camp you are purchasing or change the name to something else. If you are taking over a successful operation, it would be highly advisable to keep the name the same, unless, of course, your mission and goals are entirely different than those of the entity you are purchasing.
Camp administrators should also take care not to infringe on copyrighted materials or names. Copyright holders have the right and obligation to protect their intellectual property and spend time and money notifying entities that they believe have infringed on their name. Likewise, if you are purchasing an existing camp operation, you want to be certain that your purchase agreement includes all intellectual property owned by the former entity, like patents and trademarks on camp names, logos, and marketing slogans or phrases.
Some camp names will be shortened to initials; try out all the variations on your camp’s proposed name. Before you register the name of your camp (necessary in many states), consider al l the possibilities for how it could be shortened or misunderstood. Some well-known businesses have creative names with made-up words, but try not to get too cute with things that only you understand or a name that is long or confusing. Give your camp name the t-shirt test and picture how it would look on a camper’s t-shirt — or a canoe or however you might envision it being used.
After you have run traps on a proposed name, register it with your state’s secretary of state or the appropriate state office. The Small Business Administration’s Web site at www.sba.gov/content/register-withstate- agencies will show where in your state you need to register your name and if it is necessary to register any doing business as (DBA) names (Small Business Administration, n.d.).
Web Domain Names and Social Media
Camp executives will also want to check and see if the Web domain name associated with your camp name is available. One site that will provide this information is www.networksolutions.com/whois/. Social media sites are a must; check Facebook or other sites and claim your name as soon as possible.
Decide on the Legal Form of Business
Before deciding the legal structure of your camp, it is worthwhile to consult with an attorney and a tax advisor who can provide professional advice regarding how each is treated under the current tax code and the laws of the state in which you are doing business. Here are common legal structures and their characteristics (see Table 2 for advantages and disadvantages of each):
- When one person operates a business, it is very common to structure it as a sole proprietorship. In this structure, income of the business is taxed to the owner personally, usually at a lower rate than for a corporation. The owner receives all of the profits of the business, and the owner is ultimately responsible for all debts and liabilities. A sole proprietorship is an unincorporated business and taxes are filed with the individual’s income tax return.
- When two or more persons form a business together, it can be formed as a partnership, with each person owning a certain percentage of the business. That percentage would then apply to the division of the profits, but under a general partnership, each partner is responsible for all debts. This structure requires a formal written partnership agreement outlining who is responsible for which portions of the business; what happens when a partner is incapacitated, dies, or wants to sell his portion of the business; and how major decisions are made.
- Limited partnerships can be formed, but there are different types of partners: general partners, who have more control and can realize unlimited dividends as well as unlimited liability, and limited partners, who receive only a percentage of the business profits based on their proportionate share of investment, but who also have limited liability in a proportionate share. The IRS requires an informational tax return, but the partnership itself does not pay taxes. Instead, the income tax liability passes through to the partners, who report their proportionate share on their own tax return.
- Corporations are formed when individuals exchange money or property for the capital stock of the corporation. Corporations can be privately held or publicly held. Corporations conduct business, make a profit or loss, and can return dividends to shareholders, as well as paying taxes. Corporations are taxed when they earn profits, and shareholders are taxed again when they receive dividends. S corporations are a special type of legal structure in which the profits or losses to the corporation are passed directly to the shareholders and, therefore, taxed only one time. There are specific requirements in the tax code for S corporations, including having no more than 100 shareholders, being a domestic corporation, and having only one class of stock. The standard corporation is known as a C corporation, taxed as a separate entity. There are no restrictions on ownership of C corporations.
- Limited liability companies (LLCs) limit liability for the owners, as the business is a completely separate entity. LLCs are allowed by state statute, with each state setting its own regulations. Owners of LLCs are called members; in some states, an LLC can have only one member. Because of the differences state by state, the IRS will treat LLCs as either sole proprietorships, partnerships, or corporations.
- Nonprofit corporations are formed at the state level and do not benefit owners or shareholders. Once formed, they can apply for tax-exempt status, which is only available for those organizations formed exclusively for exempt purposes as defined by the Internal Revenue Service in section 501 of the IRS code. Lobbying and political activity are restricted for tax-exempt organizations. Although tax-exempt entities, commonly called “nonprofits,” do not pay income taxes, there are strict reporting requirements, including the filing of an annual information return, the IRS Form 990, as well as additional regulations (Internal Revenue Service, 2013). Nonprofit corporations must have a board of directors, since there are no owners or shareholders. Choice of the board is critical, as they will be providing the direction and oversight for the entity.
Please note that this information is general in nature and should not be used to guide your decision regarding the legal structure of your camp. Instead, develop questions to pose to your financial advisor and an attorney familiar with small businesses, as the legal structure of your camp will dictate how profits or dividends are distributed to you and any partners or investors, if organized as a for-profit entity.
If you have any type of business arrangement with another person or group of people (basically, anything but a sole proprietorship), you’ll need some type of governing documents. Names and requirements vary by state, but corporations generally have articles of incorporation and/or bylaws; LLCs have operating agreements; and partnerships have partnership agreements. Check your state law to see what is required.
Even if a formal document is not required by state law, it is a good business practice to have a written agreement that describes the general operating rules of the business, how disagreements will be settled should they arise, how profits and losses are distributed, what happens to the business if one of the principals dies or wants to sell his part of the business, and under what circumstances the agreement can be amended or terminated. Corporations will usually specify the composition of the board of directors, how they are elected, board terms, corporate officers, and required meetings.
Other Steps in Starting a Camp
Other steps in starting a camp include:
- Apply for an Employer Identification Number. If you will have any employees, you’ll need to file Form SS-4 with the Internal Revenue Service to get an Employer Identification Number (EIN). This form and instructions can be found at www.irs.gov/pub/irs-pdf/fss4.pdf. Camps who operate with only volunteers may also want to apply for an EIN, which is commonly used to identify businesses.
- Apply for a Sales Tax Permit. If you are selling any taxable items at your camp, you will most likely need a Sales Tax Permit. Contact your state controller for an application and for more information.
- Set up a Separate Bank Account. Even if you choose a sole proprietorship as your legal structure, a best practice is to set up a separate checking account for your new business so that your personal and business expenses will not be co-mingled.
- Determine Your Tax Year and Accounting Methods. Your tax year can be either a calendar tax year (beginning on January 1 and ending on December 31) or fiscal tax year (any twelve consecutive months ending on the last day of any month except December). You’ll also want to determine your accounting method (either cash or accrual) and begin keeping records of all financial transactions for tax purposes.
- Obtain Permits. Some states, counties, or local municipalities will require a business permit; others may require that you get a license to operate a camp. You will also want to check with your local municipality, township, county, or state agency that is responsible for issuing zoning permits and variances. All property is regulated and zoned at some level, and the intricacies of ensuring that you are properly zoned or permitted is critical to ensure that your operation is operating within all legal parameters.
- Obtain Licenses. Most states have specific rules for the operation of facilities that serve children and require at least some level of government oversight from agencies like a Department of Children and Family Services (DCFS), Department of Public Health, or other regulatory agencies. Be prepared, as sometimes these approvals can take up to a year, so you will have to plan accordingly. If your site will have pools, lakes, a private well, or any type of food service, you may be required to obtain other licenses before you are allowed to open your facility.
- Obtain Insurance. Check with your insurance agent to see what type of business insurance you need before you begin operations. If you are renting or leasing property, you’ll want to obtain a certificate of insurance from the owner confirming his insurance as well, and whether or not you have any coverage under his insurance. Also consider who will handle your workers’ compensation insurance coverage, which is mandated by every state.
There will be a myriad of other decisions to make, such as:
- Will you purchase property or lease an existing camp or other site?
- What will your target market be for campers?
- Will you need to consider transportation?
- Will you provide your own food?
- What programs will you offer?
- Will you seek accreditation by the American Camp Association?
Family Business Considerations
Many small camp businesses are family owned, a situation that brings a unique set of challenges. Mass Mutual conducted a survey of more than 500 family business owners and identified the top lessons family business owners wish they had known when they started their business. These lessons included:
- Passion and trust among family members and advisors were noted as the most important critical success factors in a family business.
- Boundaries between work and nonwork activities must be set. Even though family businesses have the advantage of control of work-life balance, there is always the challenge of family disagreements, stress, and fewer vacations.
- Communication is a key not only for business, but also for the family, leading to better decision making.
- Look at contingencies as a part of the overall strategic plan of the business. Death or disability happens to people, and those families who have acknowledged that are much better prepared to continue the family business.
- Work with your attorneys to develop an exit strategy and have a legal agreement that documents how changes in ownership will be managed.
- Work closely with an accountant and financial planner to minimize estate tax consequences when the family business ownership is transferred to the next generation. (Massachusetts Mutual Insurance Co., 2010)
These are just the first steps in setting up your camp business, but there is no need to get discouraged. Remember — camp may have been a simple joy for you as a child or counselor or for your children, but camp is still a business — and businesses require a great deal of work to be successful.
Excerpted from The Business of Camp, published by Healthy Learning.
Internal Revenue Service. (2013). Publication 557, tax-exempt status for your organization. Retrieved from www.irs.gov
Massachusetts Mutual Insurance Co. (2010). FamilyPreneurship: What every entrepreneur wants to know about being in business with a family member. Retrieved from www.massmutual.com/mmfg/pdf/FamilyPreneurship_Study.pdf
Small Business Administration. (n.d.). Register with state agencies. Retrieved from www.sba.gov/content/register-with-state-agencies
Ann Sheets is senior vice president at Camp Fire First Texas in Fort Worth and a past national president of the American Camp Association.
Dave Thoensen is the owner and director of Tamarak Day Camp and Country School in Lincolnshire, Illinois, and a member of the National Conference Program Committee.
Originally published in the 2014 January/February Camping Magazine